Wednesday, January 30, 2013

Economics of Ideas: Paul Romer and Thomas Jefferson

"What makes ideas so remarkable is their capacity
for shared use. A bottle of valuable medicine can heal one person, but
the formula that is used to make the medicine is as valuable as the
total number of people on Earth. Economists call this concept
“non-rivalry.”... There is a saying that you all know that we use to
capture this character of non-rivalry: If you give someone a fish, you
feed them for a day, but if you teach someone to fish, you destroy
another aquatic ecosystem."

For me, the classic statement about the economic power of ideas and their relation to the patent system comes from Thomas Jefferson, in a letter he wrote in 1813:

"If nature has made any one thing less susceptible than all
others of exclusive property, it is the action of the thinking power called an
idea, which an individual may exclusively possess as long as he keeps it to
himself; but the moment it is divulged, it forces itself into the possession of
every one, and the receiver cannot dispossess himself of it. Its peculiar
character, too, is that no one possesses the less, because every other
possesses the whole of it. He who receives an idea from me, receives instruction
himself without lessening mine; as he who lights his taper at mine, receives
light without darkening me. That ideas should freely spread from one to another
over the globe, for the moral and mutual instruction of man, and improvement of
his condition, seems to have been peculiarly and benevolently designed by
nature, when she made them, like fire, expansible over all space, without
lessening their density in any point, and like the air in which we breathe,
move, and have our physical being, incapable of confinement or exclusive
appropriation.

"Inventions then cannot, in nature, be a subject of property.
Society may give an exclusive right to the profits arising from them, as an
encouragement to men to pursue ideas which may produce utility, but this may or
may not be done, according to the will and convenience of the society, without
claim or complaint from anybody. Accordingly, it is a fact, as far as I am
informed, that England
was, until we copied her, the only country on earth which ever, by a general
law, gave a legal right to the exclusive use of an idea. In some other
countries it is sometimes done, in a great case, and by a special and personal
act, but, generally speaking, other nations have thought that these monopolies
produce more embarrassment than advantage to society; and it may be observed
that the nations which refuse monopolies of invention, are as fruitful as
England in new and useful devices."